Horsham Rural City Council voted four to three on Monday night to deny a planning permit to mineral sands mining company Iluka Resources.

“I am extremely disappointed that the Labor Government refused to take on the role of planning authority, as previously requested by Horsham council in 2015,” Ms Kealy said.

Iluka had applied to continue and expand its waste disposal operation at the Douglas former mine site, about 50 kilometres south west of Horsham.

Councillors voted against granting the permit over concerns about low-level radioactive waste at the site.

They also said there was a risk of setting a precedent for Horsham council to handle future mining-related planning applications.

Iluka has now appealed the decision at the Victorian Civil and Administrative Tribunal.

Cr Pam Clarke has estimated that Horsham council faces a legal bill of between $300,000 and $600,000.

Ms Kealy said the state government’s decision in April 2015 not to handle the permit process itself has now come back to hit council’s budget.

“The planning application should have been a matter dealt with by the Minister for Planning Richard Wynne,” Ms Kealy said.

“I believe that the State Minister for Planning is in a far better position to act as the planning authority in this instance and I am at a loss as to why he has shirked his responsibility in relation to this matter.

“With Iluka Resources now taking immediate steps to challenge the decision in the Victorian Civil and Administrative Tribunal, Labor has set up Horsham Rural City Council ratepayers to bear the significant costs of this legal process.”

Mr Wynne’s office did not respond to a request for comment.

Though the Douglas site is within the Horsham council’s borders, it receives waste from Iluka’s mineral separation plant near Hamilton.

Iluka has said it needs a nearby disposal site for the $250-million Hamilton plant to remain viable, along with its more than 100 jobs. 

Landowners around Douglas, who fear contamination from the waste site, have claimed Iluka could just ship the waste back to where it came from.  

Hamilton is in Southern Grampians Shire Council, which said it was disappointed with Horsham council’s decision.

“We welcome Iluka’s announcement that they will pursue this matter further,” Southern Grampians Mayor Peter Dark said.

“The continuation of the mineral sands processing plant in Hamilton is critical to the economy of Western Victoria and to our local communities.

“Council submitted to the Minister for Planning in April 2015 arguing for the matter to be called in for decision by the Minister.”